What The Heck Is Business Fraud – And How Does It Affect You?
It is unfortunate that certain people in business decide to take advantage of their customers, shareholders and employees, in order to improve their own personal finances. Those on the receiving end of fraud will often not receive a product, good or service in exchange for their money; instead they will suffer financially. Fraud can come in many different forms and can only be described as a dishonest act, with the intention to deceive and gain something or cause a loss to others.
Every business should have responsibilities and duties in place to safeguard against and to deal with any fraudulent activities that arise. This is where the Fraud Act 2006 comes into play.
There are generally three main types of fraud within business. I will now go through the three types of fraud and discuss how the Fraud Act 2006 defines them and what kind of impact they have on businesses.
Failing to disclose information
Fraud Act 2006:
A person is in breach of this section if he-
(a)dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b)intends, by failing to disclose the information-
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
All businesses are required by law to disclose certain information to their customers. Company director’s must disclose all details of share dealings and contracts. They need to provide all the required information to every potential investor. If businesses do not disclose information to their customers, which they know the customer should be aware of, they will be deemed fraudulent.
False representation
The Fraud Act 2006:
(1)A person is in breach of this section if he-
(a)dishonestly makes a false representation, and
(b)intends, by making the representation-
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
(2)A representation is false if-
(a)it is untrue or misleading, and
(b)the person making it knows that it is, or might be, untrue or misleading.
False representation covers any acts where an individual in a business commits dishonest statements about what their business provides in order to gain money. It aims to prevent businesses from making misleading statements with the intention to deceive their potential customers.
Abuse of position
The Fraud Act 2006:
A person is in breach of this section if he-
(a)occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b)dishonestly abuses that position, and
(c)intends, by means of the abuse of that position-
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
This section prevents individuals from abusing their position of power to influence and manipulate customers or the proceedings of a business. This provision of the act is in place to ensure that directors follow their duties to their company and do not attempt to finance themselves.
Most businesses will have a Fraud Prevention Policy in place to ensure individuals follow the Fraud Act 2006.A fraud prevention policy will make sure that all employees, contractors and third party users are briefed about their responsibilities. This usually includes the exchange of information with internal and external parties, especially personal details, which is a area that is often targeted by fraudulent businesses.
The internet also has a huge effect on business fraud. Because of the sheer volume of personal details (such as bank details), which are freely exchanged over the internet between consumers and businesses, fraud in business is on the increase. As e-commerce usage is on the increase more and more fraudulent businesses have decided to target online exchanges as a way of getting money and personal details. Most fraudulent businesses tend to disappear after they have got what they wanted, which makes it near enough impossible to make a claim against them.
I am a legal writer who specialises in business law, if you would like more information about fraud in business and would like to find a solicitor, I suggest you have a look at lawontheweb.co.uk
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